There may be moves to shift away from pricing oil in dollars in
future:
Will
the Dollar get an “Arab oil shock”?
Arab oil producing nations and the
some world’s largest oil consumers including China and Japan are
reliably reported to be secretly planning a long-term exit from
pricing their oil trade in dollars. If true, it would spell the
death knell for the dollar as world reserve currency, and for the
USA as “the” global economic power.
Ever since Washington tore up the Bretton
Woods treaty in August 1971 and went onto a “dollar paper reserve
system” instead of a dollar backed by gold, the United States, as
the world’s most powerful military power, has been able to dictate
financial terms to the world. Nations like Japan and later China,
dependent on US export markets, would dutifully invest their trade
surplus dollars into US Government debt, in effect financing wars
such as Iraq or Afghanistan they opposed. They saw no choice. Arab
oil producing countries, under US military pressure, were forced to
sell oil only in dollars, a direct prop to the dollar when the US
economy was in terminal decline. That may be rapidly about to come
to an end.
According to a leaked report from Arab Gulf
oil producers, there have been a series of secret meetings in
recent months between the major Arab oil producers, including Saudi
Arabia, and reportedly also Russia, together with the leading oil
consumer countries including two of the three largest oil import
countries—China and Japan.
Their project is to quietly create the basis
to end a 65-year long “iron rule” of selling oil only in US
dollars. Following the 400% oil price shock of 1973, which was
deliberately blamed by US media on “greedy Arab Shiekhs,” a senior
US Treasury official made a secret trip to Riyadh to tell the
Saudis in blunt terms that if they wanted US military defense
against potential Israeli attack, that OPEC must privately agree
never to sell oil in currencies other than the US dollar. That
“petrodollar” system allowed the US to run staggering trade
deficits and remain the world reserve currency, the heart of its
ability to dominate and control world financial markets, until the
crisis of the sub-prime real estate securitization in August
2007.
The participants in the oil pricing project
reportedly envision using a basket of currencies reflecting
producer-consumer trade relations, one backed by gold as a solid
backbone. It would not initially be a new currency as some have
surmised, but rather an arrangement that would eliminate the risks
of pricing oil sales in fluctuating and likely depreciating
dollars.
Iran announced recently that in the future it
would sell its oil for euros not dollars. According to these
reports, the basket of currencies would include a mix of yen,
euros, Chinese yuan, gold. Brazil would reportedly join as both a
producer and consumer country.
The secret plan was first reported by Middle
East correspondent, Robert Fisk, in the UKIndependent.
I have confirmed from very senior and
well-informed Gulf sources that the talks are in fact real. The oil
producing countries have been fed up for years about having to
price their oil in dollars or face US reprisals. They are steadily
losing as the dollar depreciates against other currencies and
against gold. As most Gulf Arab oil countries depend on imports
for much of their economy, dollar pricing de facto introduces
serious inflation into their economies as well. Most of their trade
is with the EU or other countries outside the US, but now that
trade must be mediated through a sinking currency, the dollar.
Following the US declaration of the War on
Terror by the Bush Administration after September 11, 2001 most
leading Arab oil producing countries privately saw US policy as
being aggressively aimed at them. The un-justifiable US invasion
and occupation of Iraq in 2003 merely confirmed that as well as
subsequent US threats against Iran.
Initially various governments involved in the
leaked plan have publicly denied vehemently such a plan. That in no
way invalidates that such moves are afoot. The participating
countries are well aware that the United States as a wounded tiger
can be far more dangerous. The leak of the plans in the world
media, whether every detail reported by Fisk is true or not, feeds
what is an inevitable decline in the dollar as a reliable reserve
currency for world commerce.
What is not clear is what the potential
response of Germany and France, the two pivot powers within the EU
will be. If they decide to cast their lot with oil producing and
consuming countries, they open their doors to vast new trade and
investment potentials from the countries of Eurasia. If they cringe
from that and decide to remain with the British Pound and US
dollar, they will inevitably sink along as the dollar Titanic
sinks.
With that decline of the US dollar goes the
lessening of the political power of the United States as sole
economic and financial superpower. We face very turbulent waters
ahead and gold not surprisingly is gaining in this uncertainty.
http://www.financialsensearchive.com/editorials/engdahl/2009/1007.html
